Estimating Korea's Exchange Rate Exposure

Abstract

This paper conducts an empirical analysis of the exchange rate exposure of 392 Korean firms by employing not only changes in the exchange rate but also the standard deviation of exchange rates as foreign exchange risk. A logit model is also used to identify the major factors in exchange rate exposure. The empirical results in the case of using the standard deviation of exchange rates suggest that: the number of firms showing significant exchange rate exposure has been relatively increasing; exchange rate exposure is more likely for export-oriented manufacturing industries than for nonmanufacturing industries; and large firms using hedging methods are likely to show a low degree of exchange rate exposure. © 2011 The Authors. Asian Economic Journal © 2011 East Asian Economic Association and Blackwell Publishing Pty Ltd.